Dear Client: 

If you didn’t know that Mexico seemed to dub beverage alcohol “unessential” this week, in an announcement aimed to curb nonessential operations to encourage social distancing, you certainly wouldn’t have gleaned that from Constellation chief Bill Newland’s earnings call open.

When he got to the part about operations, he mentioned that the company has been in talks this week with President Obrador — but those centered around Constellation’s seemingly aborted Mexicali construction plant, which has already cost them upward of $700 million but was recently voted down in a referendum. 

Bill described those conversations as “constructive,” which offered “several options for consideration.” In all, they’ll continue to work “to reach an optimal solution for our business.” 

“We’ve had a positive, mutually beneficial relationship with Mexico for more than 30 years, and fully expect it to continue,” he said.

Then he seemed to start to address the bev alc shutdown. 

In the last couple of weeks, Bill said, they’ve “taken steps to build ample product supply” across their warehouse and distributor network in the U.S.

“We have close to 70 days in the system,” he said, not including what’s at retail. And the vast majority of that — in excess of 80% — is already in the United States, at their own distribution centers, or their wholesalers. 

“And we’ve shifted resources to accelerate production of high volume skus for key off premise accounts,” Bill said. 

Bottom line: “OUR FACILITIES ARE CURRENTLY OPERATING,” Bill said. They remain confident in their “ability to continue meeting the needs of U.S. consumers and do not expect any near-term service disruption to retailers,” he reiterated several times during the call, once also saying that they expect that continued operation to be a “consistent statement.”   

BUT, WHAT MAKES CONSTELLATION SO SPECIAL? What he refused to answer, however, is what makes them so special to be able to continue operations in Mexico, in marked divergence from their competitors. Per Reuters, ABI’s Grupo Modelo said yesterday that it will halt brewing activity there as of Sunday, temporarily; meanwhile, Heineken Mexico announced something similar today, also halting production on Sunday. 

To that end, one analyst even asked Bill pointedly: “Why have you decided to go against the government’s decision?” he asked, citing those anticipated closures. 

“I do need to be very clear: We are not doing anything against what the government of Mexico is suggesting,” Bill answered. “Our company is known for respecting … the laws and approaches of any country in which we operate. That will continue. I have no comment regarding our competitors, what they are choosing to do … what I would say is, today, currently, we are operating, and we will continue to do what’s appropriate under restrictions that apply — or don’t apply — in any country in which we operate.” 

Could this have something to do with local areas not following the federal decree? As Credit Suisse reported yesterday, “No restrictions yet in Coahuila while Sonora press reporting restriction of alcohol sales.” Constellatin’s Nava brewery, the vast majority of their production, is in Coahuila. 

Then again ABI/Grupo Modelo, who announced they’re halting brewing activity, has a brewery in Coahuila too, Cerveceria Modelo de Torreón.

More next week. 

Until Monday,

Harry, Jenn and Jordan

“We are made to persist. That’s how we find out who we are.”

– Tobias Wolff

———- Sell Day Calendar ———-

Today’s Sell Day: 3

Sell days this month: 22

Sell days this month last year: 22

This month ends on a: Thurs.

This month last year ended on a: Tues.

YTD sell days Over/Under:  +1